Correlation Between Jindal Steel and Tata Steel
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By analyzing existing cross correlation between Jindal Steel Power and Tata Steel Limited, you can compare the effects of market volatilities on Jindal Steel and Tata Steel and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Jindal Steel with a short position of Tata Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Jindal Steel and Tata Steel.
Diversification Opportunities for Jindal Steel and Tata Steel
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Jindal and Tata is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Jindal Steel Power and Tata Steel Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tata Steel Limited and Jindal Steel is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Jindal Steel Power are associated (or correlated) with Tata Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tata Steel Limited has no effect on the direction of Jindal Steel i.e., Jindal Steel and Tata Steel go up and down completely randomly.
Pair Corralation between Jindal Steel and Tata Steel
Assuming the 90 days trading horizon Jindal Steel Power is expected to generate 1.04 times more return on investment than Tata Steel. However, Jindal Steel is 1.04 times more volatile than Tata Steel Limited. It trades about -0.08 of its potential returns per unit of risk. Tata Steel Limited is currently generating about -0.12 per unit of risk. If you would invest 91,800 in Jindal Steel Power on August 30, 2024 and sell it today you would lose (2,845) from holding Jindal Steel Power or give up 3.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Jindal Steel Power vs. Tata Steel Limited
Performance |
| Timeline |
| Jindal Steel Power |
| Tata Steel Limited |
Jindal Steel and Tata Steel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Jindal Steel and Tata Steel
The main advantage of trading using opposite Jindal Steel and Tata Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jindal Steel position performs unexpectedly, Tata Steel can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Tata Steel will offset losses from the drop in Tata Steel's long position.The idea behind Jindal Steel Power and Tata Steel Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.
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